Many investors seek safe investment avenues that offer high interest rates, leading them to consider Fixed Deposits (FD)
Reserve Bank of India (RBI) offers an alternative called Floating Rate Savings Bonds (FRSB), which provide higher interest rates and the security of RBI's sovereign guarantee
Floating Rate Savings Bonds (FRSB)
Interest rates on these bonds are linked to the National Savings Scheme (NSC). They offer an interest rate that is 0.35 percent higher than the NSC rate.
Understanding FRSB
The interest rates on FRSB change every six months based on NSC rates. When NSC rates rise, the interest on these bonds also increases, and vice versa.
Interest Rate Fluctuations
FRSB have a tenure of seven years, and the interest amount is credited to the investor's account twice a year, on January 1st and July 1st.
Tenure and Interest Crediting
Early withdrawal is not possible for FRSB; however, senior citizens can withdraw money with a penalty after the minimum lock-in period, which varies based on age
No Early Withdrawal
FRSB can be purchased with a minimum investment of one thousand rupees, and there is no upper limit. The interest earned on these bonds is taxable. No credit facility or transferability is available.
Minimum Investment and Taxation
Investors who do not require immediate access to their funds for seven years can consider investing in FRSB
Suitability of FRSB
Suitability of FRSB
It is particularly beneficial for those seeking an alternative to fixed deposits and provides a stable source of income, especially for senior citizens
Suitability of FRSB
Suitability of FRSB
Those who prefer a fixed rate of interest may find FRSB unsuitable, as the interest rates may fluctuate over time. However, for individuals in a lower tax bracket who prioritize risk-free investments, FRSB can be an attractive option
Suitability of FRSB
Suitability of FRSB
FRSB can be an essential component of a long-term investment strategy, providing a higher return compared to FDs and acting as a reliable source of income